Download T1 Preparation Package - Starr Celeste

Personal Income Tax Preparation Package
In order to assist you in preparation for tax season we at Starr Celeste-Falconeri, LLP,
Chartered Accountants, have prepared this Personal Income Tax Preparation Package. We
have included situations and categories which are widely applicable, however we have not, of
course, included those which would apply to only a few of you. If you have an investment or
situation which is not covered here and for which you have questions, please do not hesitate to
contact us.
We have divided this package into six sections for your convenience. Please use those
sections which are appropriate for your individual circumstances. The sections are:
$
General Slips
$
Employment Expenses
$
Unincorporated Businesses
$
Rental Income
$
Investment Income & Carrying Charges
$
Miscellaneous
General Slips
Please sort by category and provide the following information slips:
Revenue Slips
$
T3
Income from trusts, estates, mutual funds
$
T4
Income from employment
$
T4A
Self-employed commissions, pensions, scholarships, directors’ fees
$
T4A(OAS)
Income from Old age pension
$
T4A(P)
Income from Canada Pension Plan
$
T4E
Income from Employment Insurance
$
T4PS
Income from Employee profit sharing plans
$
T4RIF Income from registered retirement income funds
$
TRRSP
Income from registered retirement savings plans
$
T5
Income from investments (interest and dividends usually)
$
T5006
Labour sponsored funds tax credits
$
T5007
Workers’ compensation and social assistance benefits income
$
T5008
Statement of securities transactions
$
T5013
Statement of partnership income
-2-
Expense and other slips
$
RRSP
Contribution receipts
$
Donations
Charitable donation receipts
$
Medical
Medical receipts including doctors, dentists, hospitals, ambulance,
chiropractors, prescriptions, optometrists, private health insurance
premiums, physiotherapy, therapeutic massages, prosthetic devices,
homeopaths, naturopaths, psychologists, etc.
$
Union
Union Dues and Professional Association Memberships
$
Child Care
Receipts for day care, summer camp, T4 summaries for T4's issued to
nannies
$
Tuition
Receipts for tuition fees paid for post-secondary education
$
Students
Receipts for interest paid on you student loans
Please also include any other information slips not covered above or in any other section.
Employment Expenses
Employees who earn commission income, and employees who are required as a
condition of their employment to incur expenses in carrying out their employment
responsibilities are allowed to deduct employment expenses. These employees should obtain a
form T 2200 from their employers indicating the expenses which the employer requires them to
incur as well as information with respect to any reimbursements, etc. These T 2200 forms must
be signed by a responsible official of the employer. A copy of the signed form should be
included with your tax return to ensure that Canada Customs & Revenue Agency does not
challenge the deductibility of expenses. Further, those employees who are eligible to deduct
expenses are able to get a tax credit for the goods and services tax (GST) on these expenses
provided that the employer provides their own GST registration number.
Employees are not required to submit receipts supporting these expenses with their tax
returns, however they are cautioned that Canada Customs & Revenue Agency may, at any time,
ask to see receipts. Any difference between an expense amount claimed and the amount
supported by receipts will be disallowed and added back to income. You are advised to include
in your expense totals only those expenses for which you have receipts. A summary of
employment expenses is included on the next page. Simply fill in the total of each of your
receipts next to the appropriate description.
Employees who are required to use their personal vehicles are reminded that they are
required by Canada Customs & Revenue Agency to maintain a log book of kilometers driven,
separating out the business and personal kilometers driven. Failure to produce a log book upon
request will result in the disallowance of automobile expenses. The deductible portion of
automobile expenses will be calculated by us based upon the ratio of business kilometers over
total kilometers for the year.
Employees who are required to maintain an office in their homes are reminded that home
office expenses can be claimed only if your employer does not provide you with space at their
offices, or only if the home office is used EXCLUSIVELY for seeing clients. We will calculate
your allowable home office expenses for you based upon the ratio of office square footage over
total square footage of your residence.
Employees who move at least 40 km closer to a new place of employment are eligible to
claim moving expenses against their income from the new work location. If you do not have
enough income from the new employment in the year you move to enable you to fully deduct the
moving expenses you may carry the moving expenses forward to another year.
Unincorporated Business
Those with unincorporated businesses are required to keep proper records of their
revenues and expenses. At the very least, we ask that you sort and add your receipts by category.
We have included the next page for you to summarize your revenue and expenses. If you have
more than one unincorporated business, please feel free to make photocopies of the sheet and
please use a separate sheet for each business.
Revenue should be shown EXCLUSIVE of GST and PST (include only your fee or price)
and net of any discounts and allowances. It is not necessary to separate revenue by category.
Expenses must be reasonable in the circumstances, and must have been incurred for the
purpose of earnings business income. Thus, personal expenses are not deductible and should not
be included. Similarly, the expenses must appear to make sense in the circumstances and must
be for a business purpose.
Those who use their personal vehicles are reminded that they are required by Canada
Customs & Revenue Agency to maintain a log book of kilometers driven, separating out the
business and personal kilometers driven. Failure to produce a log book upon request will result
in the disallowance of automobile expenses. The deductible portion of automobile expenses will
be calculated by us based upon the ratio of business kilometers over total kilometers for the year.
Those who maintain an office in their homes are reminded that home office expenses can
be claimed only if the home office is used EXCLUSIVELY for business purposes. We will
calculate your allowable home office expenses for you based upon the ratio of office square
footage over total square footage of your residence. If your business has a loss, you will not be
able to deduct home office expenses, however you will be able to carry the home office expenses
forward to a profitable year to reduce business income in that year.
Capital items are NOT allowable expenses. Instead, these items are “pooled” into
categories set out by Canada Customs & Revenue Agency and depreciated, or written off over
time. Capital items include buildings, furniture, equipment, computers, photocopiers,
telephones, etc. These are items which will last for several years. Please list items purchased
during this year only beside the capital asset items on the next sheet.
You do not have to include your business receipts with your tax return, however you
must keep the receipts available in case Canada Customs & Revenue Agency asks to review
them. In the event you are asked to produce receipts, any difference between the expense
amount claimed and the amount supported by receipts will be disallowed and added back to your
income for the year.
Business losses may be used to reduce income from any other sources. In the event you
do not have sufficient income from other sources to use up a business loss, you may carry the
loss back for three years or forward for seven years to reduce taxable income in those years.
Rental Income
Those with rental properties are required to keep proper records of their revenues and
expenses. At the very least, we ask that you sort and add your receipts by category. We have
included the next page for you to summarize your revenue and expenses. If you have more than
one rental property, please feel free to make photocopies of the sheet and please use a separate
sheet for each property, but not for each unit.
Revenue should be shown EXCLUSIVE of GST (which is only charged on commercial
units and not on residential units) and net of any discounts and allowances. It is not necessary to
separate revenue by unit.
Expenses must be reasonable in the circumstances, and must have been incurred for the
purpose of earnings rental income. Thus, personal expenses are not deductible and should not be
included. Similarly, the expenses must appear to make sense in the circumstances and must be
for a business purpose.
Those who use their personal vehicles are reminded that they are required by Canada
Customs & Revenue Agency to maintain a log book of kilometers driven, separating out the
rental and personal kilometers driven. Failure to produce a log book upon request will result in
the disallowance of automobile expenses. The deductible portion of automobile expenses will be
calculated by us based upon the ratio of rental kilometers over total kilometers for the year.
Those who maintain an office in their homes are reminded that home office expenses can
be claimed only if the home office is used EXCLUSIVELY for rental business purposes. We
will calculate your allowable home office expenses for you based upon the ratio of office square
footage over total square footage of your residence.
Capital items are NOT allowable expenses. Instead, these items are “pooled” into
categories set out by Canada Customs & Revenue Agency and depreciated, or written off over
time. Capital items include buildings, furniture, equipment, computers, photocopiers,
telephones, etc. These are items which will last for several years. Please list items purchased
during this year only beside the capital asset items on the next sheet. Please not that for rental
income you can use depreciation to reduce taxable income, however you cannot use depreciation
to bring income down below break even. Rental losses cannot include depreciation.
You do not have to include your rental expense receipts with your tax return, however
you must keep the receipts available in case Canada Customs & Revenue Agency asks to review
them. In the event you are asked to produce receipts, any difference between the expense
amount claimed and the amount supported by receipts will be disallowed and added back to your
income for the year.
Rental losses may be used to reduce income from any other sources. In the event you do
not have sufficient income from other sources to use up a business loss, you may carry the loss
back for three years or forward for seven years to reduce taxable income in those years.
Investment Income & Carrying Charges
Those with financial investments will usually receive T3 or T5 slips from the payor to
support the interest or dividend income they have received. For those who invest in mortgages
or other investments which do not issue T slips, please complete the appropriate sections of the
next page. PLEASE DO NOT INCLUDE AMOUNTS WHICH ARE ALREADY INCLUDED
ON T SLIPS IN ORDER TO ENSURE THAT THESE AMOUNTS ARE NOT INCLUDED
TWICE!
If you have purchased or sold any assets during the past year, please complete the Capital
Gain Worksheet on the page following the next page. For each asset sold, we will need to know
the dates of original purchase and final sale, the amount paid to purchase the asset, any fees or
commissions paid upon purchase, the amount the assets was sold for, and any fees or
commissions paid upon sale. Essentially, the difference between the purchase and selling prices,
fees included, will be a capital gain or loss. The gains and losses on all of your transactions for
the year will be netted against each other (gains less losses). One half of all net gains will be
taxable and included in your income subject to tax at your usual rates. Any net losses can be
carried back for three years or forward indefinitely and used ONLY to reduce capital gains of
other years.
You are permitted to deduct reasonable expenses incurred for the purpose of earning
investment income. Usual fees are interest paid on loans where the proceeds of the loan were
used for investment purposes, fees for investment advice, accounting, legal and other
professional fees involved with the investments, safety deposit box charges for storing business
documents, and similar items. Please complete the appropriate section of the next page to
indicate investment expenses and carrying charges by category.
Miscellaneous
Alimony and support
Alimony, maintenance, or spousal support, refers to amounts paid
to a former spouse. This is deductible to the paying spouse and
taxable to the receiving spouse PROVIDED that the payments are
made in accordance with a court order or WRITTEN separation
agreement, and PROVIDED that they are part of a series of regular
payments (not a lump-sum distribution of assets).
Child support payments made under rules in effect for the past
several years are not deductible to the payer or taxable to the
recipient.
Please provide details of any support payments received or paid by
you during the year.
Home Buyers’ Plan
If you have withdrawn funds from your RRSP under the home
buyers’ plan available for first time home purchasers, please
provide full details of the dates and amounts withdrawn.
Life Long Learning Plan
If you have withdrawn funds from your RRSP under the life long
learning plan to enable you to continue your studies, please
provide full details of the dates and amounts withdrawn.